<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended September 30, 2000
------------------
or
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number: 1-4753
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Puerto Rican Cement Company, Inc.
--------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Commonwealth of Puerto Rico 51-A-66-0189525
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
P.O. Box 364487 - San Juan, P.R. 00936-4487
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (787) 783-3000
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Not Applicable
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common stock, $1.00 Par Value: 5,186,274 Shares Outstanding
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PUERTO RICAN CEMENT COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheet as of September 30, 2000 and
December 31, 1999............................................................. 3 - 4
Consolidated Statement of Income for the three-month and nine-month
periods ended on September 30, 2000 and 1999.................................. 5
Consolidated Statement of Cash Flows for the nine-month
periods ended on September 30, 2000 and 1999.................................. 6
Notes to Consolidated Financial Statements.................................... 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 8 - 11
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk................................................................... 12
Part II - Other Information............................................................. 12
Signatures.................................................................... 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September December
30, 2000 31, 1999
--------- --------
(In thousands)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,008 $ 1,631
--------------------------------------------------------------------------------------------------
Short-term investments 17,624 6,001
--------------------------------------------------------------------------------------------------
Notes and accounts receivable - net of allowance
for doubtful accounts of $903 in 2000 and
$1,101 in 1999 37,363 34,968
--------------------------------------------------------------------------------------------------
Inventories:
Finished products 2,810 2,435
Work in process 6,839 7,026
Raw materials 4,839 3,894
Maintenance and operating supplies 23,016 22,023
Land held for sale, including development costs 615 923
--------------------------------------------------------------------------------------------------
Total inventories 38,119 36,301
--------------------------------------------------------------------------------------------------
Prepaid expenses 7,995 5,580
--------------------------------------------------------------------------------------------------
Total current assets 102,109 84,481
Property, plant and equipment - net of accumulated
depreciation, depletion and amortization of $103,917 as of
September 30, 2000 and $93,331 as of December 31, 1999 169,915 168,650
Long-term investments 29,530 39,712
Other assets 14,705 11,746
--------------------------------------------------------------------------------------------------
Total $316,259 $304,589
==================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
Puerto Rican Cement Company, Inc.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September December
30, 2000 31, 1999
--------- --------
(In thousands)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities
Notes payable $ 5,775 $ 654
Current portion of long-term debt 4,076 3,806
Accounts payable 14,117 9,665
Accrued liabilities 10,062 9,233
Income taxes payable 999 4,075
--------------------------------------------------------------------------------------------
Total current liabilities 35,029 27,433
--------------------------------------------------------------------------------------------
Long-term liabilities
Long-term debt, less current portion 80,389 81,365
Deferred income taxes 30,926 30,788
Other long-term liabilities, including
postretirement benefits 3,064 3,105
--------------------------------------------------------------------------------------------
Total long-term liabilities 114,379 115,258
--------------------------------------------------------------------------------------------
Total liabilities 149,408 142,691
--------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, authorized 2,000,000
shares of $5.00 par value each; none issued
Common stock, authorized 20,000,000
shares of $1.00 par value each; issued
6,000,000 shares; outstanding 5,186,274 shares
as of September 30, 2000 and December 31, 1999 6,000 6,000
Additional paid-in capital 14,703 14,703
Retained earnings 169,174 164,221
--------------------------------------------------------------------------------------------
189,877 184,924
Less: Shares of common stock in treasury, at cost
(813,726 shares as of September 30, 2000 and
December 31, 1999) 23,026 23,026
--------------------------------------------------------------------------------------------
Stockholders' equity - net 166,851 161,898
--------------------------------------------------------------------------------------------
Total $316,259 $304,589
============================================================================================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
Puerto Rican Cement Company, Inc.
Consolidated Statement of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Net sales $ 39,828 $ 43,417 $ 123,342 $ 136,109
Revenue from real estate operations 128 27 684 79
-----------------------------------------------------------------------------------------------------------------
39,956 43,444 124,026 136,188
Cost of sales 30,154 33,418 94,625 98,296
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Gross margin 9,802 10,026 29,401 37,892
Selling, general & administrative expenses 6,073 6,170 17,742 20,479
-----------------------------------------------------------------------------------------------------------------
Income from operations 3,729 3,856 11,659 17,413
-----------------------------------------------------------------------------------------------------------------
Other (credits) charges:
Interest and financial charges 1,637 1,337 4,753 4,417
Interest income (1,005) (860) (2,941) (2,692)
Other expenses (366) (188) (291) 404
-----------------------------------------------------------------------------------------------------------------
Total other charges 266 289 1,521 2,129
-----------------------------------------------------------------------------------------------------------------
Income before income tax 3,463 3,567 10,138 15,284
Provision for income tax 890 1,008 2,229 4,446
-----------------------------------------------------------------------------------------------------------------
Net income $ 2,573 $ 2,559 $ 7,909 $ 10,838
=================================================================================================================
Net income per share $ 0.50 $ 0.48 $ 1.53 $ 2.05
=================================================================================================================
Average common shares outstanding 5,186,274 5,293,385 5,186,274 5,293,385
=================================================================================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
Puerto Rican Cement Company, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30, 2000 1999
------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,909 $ 10,838
------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and amortization 11,091 10,490
Accretion of discount on investments (1,494) (1,782)
Provision for deferred income taxes 139 (440)
Postretirement benefits cost (19) (26)
(Gain) loss on sale of fixed assets (170) 13
Changes in assets and liabilities:
Increase in notes and accounts receivable (2,813) (6,943)
(Increase) decrease in inventories (1,818) 2,026
Increase in prepaid expenses (2,415) (3,027)
Increase in other long-term assets (2,066) (467)
Increase in accounts payable 4,448 3,261
Increase in accrued liabilities 829 1,159
(Decrease) increase in income taxes payable (3,076) 1,824
Decrease in long-term liabilities (23) --
------------------------------------------------------------------------------------------
Total adjustments 2,613 6,088
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Cash provided by operations 10,522 16,926
------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,555) (16,318)
Increase in long-term notes receivable (516) (3,872)
Redemption of long-term investments 1,053 14,037
Purchase of investments (1,000) (5,160)
Proceeds from sale of fixed assets 411 109
------------------------------------------------------------------------------------------
Cash used in investing activities (12,607) (11,204)
------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 3,000 --
Proceeds from loans 2,400 5,249
Repayment of long-term debt (3,106) (2,134)
Purchase of treasury stock -- (6,411)
Dividends paid (2,953) (3,043)
Increase in notes payable 2,121 335
------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 1,462 (6,004)
------------------------------------------------------------------------------------------
(Decrease) in cash and cash equivalents (623) (282)
Cash and cash equivalents - beginning of period 1,631 7,481
------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period $ 1,008 $ 7,199
==========================================================================================
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
PUERTO RICAN CEMENT COMPANY, INC.
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements: In the opinion of Puerto Rican Cement Company,
Inc. (the "Company," "Registrant" or "PRCC"), the accompanying
unaudited financial statements contain all adjustments necessary to
present fairly its financial position at September 30, 2000 and
December 31, 1999; the results of operations for the nine-month and
three-month periods ended September 30, 2000 and 1999; and its cash
flows and changes in stockholders' equity for the nine-month periods
ended September 30, 2000 and 1999. The results of operations for this
interim period are not necessarily indicative of the results to be
expected for the full year.
2. Comprehensive income: Other comprehensive income includes, among other
things, net realized and unrealized gains and losses on investments in
available-for-sale securities. The Company had no item reported as
comprehensive income during the third quarters of 2000 and 1999.
3. Segment information: The Company has identified three reportable
segments: cement operations, ready mix concrete operations and all
others, which includes the lime, realty, financing, and paper and
packaging operations. Segment detail for the nine-month period is
summarized as follows (000's omitted):
<TABLE>
<CAPTION>
Ready Mix All
Cement Concrete Others Total
-------- --------- -------- --------
<S> <C> <C> <C> <C>
September 30, 2000
Revenues
Total revenues $ 71,618 $ 69,656 $ 8,680 $149,954
Less - Intersegment revenues 22,098 -- 3,830 25,928
-------- -------- -------- --------
Net revenues $ 49,520 $ 69,656 $ 4,850 $124,026
======== ======== ======== ========
Total assets $181,524 $ 63,660 $ 71,075 $316,259
======== ======== ======== ========
<CAPTION>
Ready Mix All
Cement Concrete Others Total
-------- --------- -------- --------
<S> <C> <C> <C> <C>
September 30, 1999
Revenues
Total revenues $ 83,760 $ 74,563 $ 10,091 $168,414
Less - Intersegment revenues 28,489 -- 3,737 32,226
-------- -------- -------- --------
Net revenues $ 55,271 $ 74,563 $ 6,354 $136,188
======== ======== ======== ========
Total assets $169,378 $ 64,444 $ 75,559 $309,381
======== ======== ======== ========
</TABLE>
7
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Cash and cash equivalents decreased $600,000 from $1.6 million as of
December 31, 1999 to $1.0 million as of September 30, 2000. Short-term and
long-term investments held to maturity increased $1.5 million to $47.2 million
at September 30, 2000 from $45.7 million at December 31, 1999. This was mainly
the result of the $1.1 million accretion in the value of the investment in
zero-coupon notes intended to pay at maturity notes issued by the Company to
certain institutional investors. The shift from long-term investment to
short-term investment was principally due to a reclassification to short-term of
those investments that matured in less than one year.
Notes and accounts receivable increased by $2.4 million to $37.4
million as of September 30, 2000 from $34.9 million as of December 31, 1999.
This increase is considered seasonal as historically volume of sales and
consequently the related receivables tend to decrease in the last quarter of the
year.
Inventories increased $1.8 million to $38.1 million as of September 30,
2000 from $36.3 million as of December 31, 1999 due to increases of $570,000 in
coal and $547,000 in spare parts inventories.
The increase of $2.4 million in prepaid expenses is mainly due to
higher balances in prepayments related to property and municipal taxes, as well
as insurance, and the timing of their scheduled payments. These prepayments will
be fully amortized by year-end.
Total current liabilities increased by $7.6 million to $35.0 million as
of September 30, 2000 from $27.4 million as of December 31, 1999. The increase
was mainly due to a $5.1 million increase in notes payable on borrowings used
for short-term working capital needs. In addition, there was a $5.3 million
increase in accounts payable and accrued liabilities. The increase in accounts
payable resulted mainly from a greater amount of purchases of raw materials in
the third quarter of 2000 as compared to the last quarter of 1999. Accrued
liabilities increased due to certain liabilities, such as the Christmas bonus,
which are accrued during the year and paid at the end of the year.
At its September 27, 2000 meeting, the Board of Directors of PRCC
declared a $0.19 per share dividend on its common stock, payable on November 10,
2000 to stockholders of record on October 6, 2000. As of September 30, 2000,
PRCC had 5,186,274 shares of common stock outstanding.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 2000, increased to $67.0 million from
$57.0 million at December 31, 1999, but the current ratio decreased to 2.91 to 1
as of September 30, 2000, from 3.08 to 1 as of December 31, 1999. The reduction
in the current ratio was due mainly to the increase in current liabilities as
described above.
Property, plant and equipment increased by $1.2 million to $169.9
million as of September 30, 2000 from $168.7 million as of December 31, 1999 due
to capital expenditures of $12.6 million net of depreciation and amortization of
$11.1 million. The capital expenditures were primarily related to improvements
to machinery and equipment at the cement and ready mix concrete plants.
Total long-term debt as of September 30, 2000 decreased to $84.5
million from $85.2 million as of December 31, 1999. The decrease was due to $3.1
million in debt repayment, net of $2.4 million in proceeds from new loans.
As of September 30, 2000, the approximate aggregate maturities of
long-term debt for the remainder of 2000 and thereafter are as follows (000's
omitted):
<TABLE>
<S> <C>
2000 $ 1,073
2001 5,089
2002 4,747
2003 2,436
2004 and thereafter 71,120
-------
Total $84,465
=======
</TABLE>
Loan agreements with term lenders impose certain restrictions on the
Company concerning working capital, indebtedness, dividends, investments and
certain advances, among other restrictions. As of September 30, 2000, the
Company complied with the provisions of the loan agreements. The Company's long
term debt includes $70 million in notes issued pursuant to a loan agreement to
several institutional investors. These notes require no payment of principal
until their maturity date and are secured by a $70 million zero-coupon U.S.
Treasury bond pledged as collateral.
The Company has available credit facilities in the aggregate amount of
$42,000,000 with commercial banks for short-term financing and discount of trade
paper from customers. These short-term facilities are renewable annually at the
discretion of the banks, which at this time do not require any commitment fees.
The average borrowing outstanding for the quarter and the maximum aggregate
short-term borrowing outstanding at any month-end during the third quarter of
2000 was $5,775,000.
9
<PAGE> 10
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1999
Net income for the third quarter of 2000 totaled $2,573,000, or $0.50
per share, compared with $2,559,000, or $0.48 per share, in the comparable
quarter of 1999.
Consolidated net revenues were $39,956,000 during the third quarter in
2000 compared with $43,444,000 for the same period in 1999. The Company's cement
sales for the third quarter of 2000 amounted to 270,000 tons as compared to
349,000 tons sold in the same quarter of 1999, a decrease of 23%. The cement
industry of the Island continues to be impacted by higher imports of cement.
Ready mix concrete sales decreased to 343,000 cubic yards for the third quarter
of 2000 from 381,000 cubic yards sold during the same period of 1999.
Consolidated cost of sales for the third quarter of 2000 decreased 9.8%
to $30.2 million from $33.4 million for the comparable period of 1999. The
reduction was principally due to lower sales volume as mentioned above. On a per
unit basis, cost of sales reflect lower cement production costs during the third
quarter of 2000 compared to the third quarter of 1999 due to the unfavorable
effect of clinker import to the cost of production. Gross margin for the third
quarter improved from 23.1% in 1999 to 24.5% in 2000. The increase in gross
margin was the result of lower production cost for cement plus the effect of a
5% increase in the selling price for ready mix concrete beginning in May 2000.
Selling, general and administrative expenses decreased slightly to $6.1
million during the third quarter of 2000 from $6.2 million over the comparable
quarter of 1999. The provision for income taxes as a percentage of income before
taxes decreased from 28% for the third quarter of 1999 to 26% for the same
period of 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1999
Net income for the nine-month period ended September 30, 2000 totaled
$7,909,000, or $1.53 per share, compared with $10,838,000, or $2.05 per share,
for the comparable period of 1999.
Consolidated net revenues decreased $12.2 million from $136,188,000
during the nine-month period ended September 30, 1999 compared with $124,026,000
for the same period in 2000. The reconstruction efforts related to damages
caused by Hurricane Georges drove up demand for cement and ready mix concrete in
1999. Demand for cement has returned to normal levels in 2000. The Company's
cement sales in the nine-month period ended September 30, 2000 were 846,000 tons
compared to 995,000 tons over the comparable 1999 period. Our ready mix concrete
subsidiary sold 1,078,000 cubic yards during the nine months period ended
September 30, 2000 compared with 1,182,000 cubic yards during the same period of
1999. The 9% decrease resulted from a strong construction activity in 1999
driving sales to extraordinary levels during that period.
10
<PAGE> 11
Consolidated cost of sales for the nine-month period ended September
30, 2000 decreased $3.7 million to $94.6 million from the comparable period of
1999, partially because of the decrease in sales. However, gross margin
percentage declined from 27.8% for the nine months of 1999 to 23.7% for the
comparable 2000 period due to higher production costs resulting from increased
repair expenses as well as higher fuel and energy costs in all production areas.
As mentioned before, increased repair expenses resulted from a scheduled
production shutdown of our cement facilities during the first quarter of 2000.
Selling, general and administrative expenses during the nine-month
period of 2000 decreased 14% to $17.7 million from $20.5 million over the
comparable period of 1999. Selling, general and administrative expenses were
higher in 1999 principally because of legal fees resulting from the proceedings
against local government agencies in federal and local courts. These legal
actions were settled during the first half of 1999.
The provision for income taxes as a percentage of income before taxes
decreased from 29% for the nine-month period of 1999 to 22% for the same period
of 2000. This decrease is principally related to a reduction in taxable income
during 2000 and the more favorable tax treatment of the gains on the sale of
real estate realized during 2000.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this document, including those in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations, that are not historical facts constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results or performance
of the Company and its businesses to be materially different from that expressed
or implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions; political and
social conditions; government regulations and compliance therewith; demographic
changes; sales mix; pricing levels; changes in sales to, or the identity of,
significant customers; changes in technology, including the technology of cement
production; capacity constraints; availability of raw materials and adequate
labor; availability of liquidity sufficient to meet the Company's needs; the
ability to adapt to changes resulting from acquisitions; and various other
factors referenced in this Management's and Discussion Analysis. The Company can
be particularly affected by weather in Puerto Rico, changes in the Puerto Rico
economy, and changes in the Government of Puerto Rico or the manner in which it
regulates the Company.
The Company assumes no obligation to update forward-looking statements
to reflect actual results or changes in or additions to the factors affecting
such forward-looking statements.
11
<PAGE> 12
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's investment portfolio is subject to market risk. Market
risk is the risk of economic loss arising from adverse changes in market rates
and prices, such as interest rates and other relevant market prices. The
Company's primary market risk exposure relates to interest rates, as interest
rate volatility impacts the value of the Company's investment portfolio. The
re-pricing of the Company's financial assets and liabilities also affects
interest income and interest expense. The Company manages its interest rate risk
exposure to maintain the stability of interest income and interest expense under
varying interest rate environments. The Company has taken certain steps to
minimize its interest rate risk exposure, which include obtaining long-term
financing at fixed interest rates (see discussion under liquidity and capital
resources.) At the same time, to minimize its interest rate risk exposure and
manage its liquidity needs, the Company invests primarily in securities issued
or guaranteed by the US government and its agencies with short-term (one year or
less) and medium-term (over 1 through 7 years) maturities. The Company has also
invested in a US government security with a 20-year term (due 2017) to serve as
collateral and a source of repayment for one of its long-term debts.
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
27. Financial Data Schedule .
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUERTO RICAN CEMENT COMPANY, INC.
-------------------------------------------
Registrant
Date: November 14, 2000 By: /s/ Jose O. Torres
-------------------------------------------
Jose O. Torres
Vice President and Chief Financial Officer
13
